Gold has gained 20% in the last two months and reached an all-time high of 2400 last week. That’s great, because prior to that, Gold did next to nothing for more than a decade. People are clearly worried, there are wars, there was government buying, and something to do with Gold’s inverse relationship with real rates, which is no more.
What the current price of Gold suggests apparently, is that central banks may not be able to cut rates to help the economy, because inflation remains too high. That’s not good, neither is the pending apocalypse, but remember the last thing we will be doing in the last hour is trying to cash in our gold contracts from the exchange.
So, other than stuffing some bullion under our mattresses, is there any reason to put Gold in our investment portfolios? It pays no dividends, costs money to hold, and offers scant protection when equities go through a major correction. During Covid and even the Great Financial Crisis, Gold went down with everything else before it recovered, and equities were already well on their way.
Which brings us to the real reason we should all hold a bit of the shiny metal, because it never does what it is supposed to. That gives us diversification, and sometimes even good performance, but not necessarily a lot of faith in the implications that come from its pricing. The only thing we know for sure is that the likelihood of Gold going to 1800 from here, is the same as it going to 3000.